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5 Big Trades From the Financial Sector

Wells Fargo

Not all of the setups we're looking at this week are positive. The sole downside trade on our list is Wells Fargo (WFC - Get Report), the big bank that's been such a Wall Street darling of late.

Despite Wells' fundamental status as the best of the big banks, this stock is looking technically weak right now after triggering a double top pattern. Here's how to trade it.

>>5 Bank Stocks Bernanke Can't Hurt Anymore

Wells made two tops at the $36.50 level, a reversal pattern that became a sell signal once WFC broke down through the horizontal support line on the chart above. Investors have October 12 earnings to thank for the breakdown. While the relatively small height of the tops means that WFC's downside target is pretty nearby, it's not uncommon for short-term reversal patterns to spur on longer-term reversals. If you're looking for a buying opportunity in Wells, I'd recommend sitting tight until this stock can find its next closest support level.

Shorts still have some high-probability downside left in this WFC trade. If you decide to bet against shares, I'd suggest keeping a tight stop just above the 50-day moving average.

I also featured Wells in " 5 Stocks to Buy to Be Like Buffett."
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